The fall of IndyMac
Last Updated: July 13, 2008
http://money.cnn.com/2008/07/12/news/companies/indymac_fdic/
NEW YORK (CNNMoney.com) -- In what could turn out to be the most expensive bank failure ever, troubled mortgage lender IndyMac Bancorp Inc. was taken over by federal regulators on Friday.
The operations of the Pasadena, Calif.-based thrift - once one of the nation's largest home lenders - were shut down at 3 p.m. PDT by the Office of Thrift Supervision and transferred to the Federal Deposit Insurance Corp.
. . . .
How IndyMac rose in the boom
IndyMac grew rapidly during the real estate and home building boom. Its specialty was so-called Alt-A loans, those for which home buyers were asked to produce little or no evidence of income or assets other than the house they were buying.
While home prices climbed, Alt-A loans posed few problems for IndyMac. If a buyer wasn't able to afford his payments, the bank got title to a home worth more than the amount owed. The bank was also able to find investors eager to buy pools of those mortgages that had been pulled together into securities backed by the future payments.
But when the housing bubble burst and prices began to fall, losses at IndyMac began to rise. Investors ran away from the mortgage-backed securities, leaving the bank to suffer the loan losses itself and without the funding it needed to make new, safer loans.
>>>>>
Zim: So, Did Schumer cause the collapse?
Or did IndyMac cause the collapse by making loans
that should never have been made?
| 